Heading into the annual Rendez-vous de Septembre in Monte Carlo this year, reinsurance pros are anticipating some complex negotiations for January renewals, given the stubborn resistance to price hikes the market is seeing, even with 2011's eye-popping catastrophe losses and a flinty investment environment.

Big changes in pricing or direction are not anticipated going into January. In most casualty treaty lines, "it's a very flat market," said Simon Clutterbuck, director of broker BMS Group's BMS Intermediaries Ltd. and BMS Re Ltd. From the reinsurer's view, this may be seen as evidence of better discipline in underwriting compared with a few year ago, but brokers might find these conditions "frustrating" in that they don't allow the broker to get more favorable rates for a client that the client might deserve, he said.

"The overwhelming feel at the moment is that it's not a very exciting market," Clutterbuck said. "I don't think there's any real doubt that subject to any major loss, prices at least will be easing in exposure-related terms. You might be paying a bit more but you'll be paying less when exposure changes year-on-year are taken into consideration."

Reinsurance broker Aon Benfield said in its just-released Aon Benfield Aggregate report that total global reinsurer capital totaled a record US$480 billion at June 30, 2012, up 5% from Dec. 31, 2011. The broker said its calculation is "a broad measure of capital available for insurers to trade risk with and includes both traditional and nontraditional forms of reinsurance capital."

"In stark contrast to the prior year, the relatively low level of insured catastrophe losses in the first half of 2012 allowed most ABA companies to report good earnings and consequent capital growth," said Mike Van Slooten, head of Aon Benfield's international market analysis team, in a statement.

Reflecting some of the pressing concerns for reinsurers, this year's main panel discussion at Rendez-vous, chaired by Scor SE Chief Executive Denis Kessler, is on "capital management, capital allocation and the demand for insurance and reinsurance."

A.M. Best Co., which will host its own presentation on Sept. 9 at Rendez-vous, said in its just-released annual global reinsurance market review that capital levels are "flat" at the moment, and the heavy catastrophe losses of 2011 have not had a substantial effect on the abundant capital still available.

In a recent A.M. Best webinar on reinsurance, A.M. Best Senior Vice President Robert DeRose noted Europe, as the world's second-largest market behind the United States, remains stable from a pricing perspective through the current economic turmoil. "Europe tends to be more stable overall, from a pricing perspective, than the United States and certainly Asia, given the losses that have occurred there," he said.

The world's top four reinsurers, according to A.M. Best's ranking of the top 50, are European Munich Re, Swiss Re, Hannover Re and Scor.

"Going into 2012, the market was optimistic that January, April and July renewals would be favorable for the global reinsurers," said A.M. Best in the report. "As it happened, renewals did firm, but ample capacity tempered the benefit, and pricing improvements have dwindled as the year progressed."

Casualty lines represent long-tail risks, and those such as financial lines, professional indemnity and retrocession might be the exceptions to weak pricing, according to Clutterbuck. For professional indemnity, BMS is mostly a "bystander" in directors and officers coverage, though Clutterbuck commented that the D&O market hasn't seen the hardening one might expect given scandals such as the Bernie Madoff episode and the more current LIBOR investigation. He said BMS operates in health care-related professional indemnity markets and errors and omissions coverage.

Clutterbuck said it would take "something amazing" to shake up the reinsurance market, given it is "probably more sophisticated" than in the past. "The availability of capital is probably reflective of what's possible in the market at any point in time," he said, adding that there is less of a massive reaction to market developments than in the past.

In casualty lines, Clutterbuck said there have been observations by some that reinsurers in certain areas are "writing below future loss probabilities" but are still drawing down on excess reserves and using that capital. "It might appear to put them in a weaker state," he said, but there is no reflection of that in ratings.

"That means there is still plenty of capital around, and until that capital is eaten through in some material way people are going to leave things as they are," he said.

On the property side, it would take a "very big event" like a Category 5 hurricane hitting Miami to jolt the reinsurance market for anything beyond a year or two, as new capital would find its way back into the market from other areas, said Clutterbuck.

Asked about the impact of new reinsurance operations backed by hedge funds and other capital, Clutterbuck said from a broker's point of view it would depend on what they bring to the table aside from the capital. BMS wouldn't "go out of our way" to disrupt established working relationships to deal with a new entity for the capital alone.

If a new reinsurer offers a new product or different approach that adds value to the equation, "we would work with them," he said. "No broker is going to say they have too many markets; they always want markets to choose from." Reinsurance buyers are also more open to subscription systems and won't necessarily place the bulk of their business in one place, he added.

Key to a new reinsurance operation's attractiveness is whether it can attract underwriting talent that is known to the market. Underwriters with a good reputation would put potential clients at ease.

Clutterbuck said he sees good business prospects in Canada, given its close ties to both the United States and United Kingdom and a strong economy. "One of the idiosyncrasies of the Canadian market is that much of it is Quebec-based," he said.

Reinsurance risks in Canada are similar to those in the United States, said Clutterbuck. Both countries have west coast earthquake exposure. In that respect the cities of Seattle, Los Angeles and Vancouver are very similar, he said.

While there is a "vibrant" reinsurance business in Canada, there is also a preference for writing domestic business, making it a competitive market, said Clutterbuck.